Wading through the Swamp

Tyler Cowen and Christina Romer are very bright people who have faith in monetary policy, though I really have doubts of its efficacy. It works great when opportunity exists to absorb created Cash, but may fail drastically without mechanism to transfer that Cash to the Consumer for Consumption. The current Outcome of monetary policy has no structure to deliver the Cash to people who would buy the increased amount of Product hoped for by the Regulators. One should remember that this Crisis could be called the Consumer Cash Flow Recession, where they had incurred too many liabilities while lacking any Income increment avenue. Monetary policy can mean nothing in such an Environment; it reminding of the old adage that Generals are always fighting the last War.

Tyler advocates getting the small things Right, then enters a condemnation of the Roosevelt system of agricultural subsidies; he doesn’t like them, and I don’t particularly care for them either. The qualification, here, remains that Farmers will be planting next year at a Production Cost about $2 per bushel higher than the Market price for that grain. The ideal Economic argument states that the Market price of these Grains should rise to pay for agricultural Production Costs; the qualification being that such a Rise would absorb about 30% more Consumer Discretionary Income, when the greatest danger to the Economy is a decline in Consumption of large-Ticket items by Consumers. The first thing to go from Household Budgets under stress is renewal of large-Ticket items. One has to ask why there is such animosity to agricultural subsidies, while there is no critique on subsidizing financial institutions.

We really must increase Employment. It would help if the Government would cease declaration of a reduction of employment by venue of Unemployment Benefits running out; it being an immense gain simply to honestly state the Unemployment rate. Obama’s new Green policy could and should employ Millions, and in a manner which is self-perpetuating; actually producing a Product which can be sold–Energy, even if it is not immediately Profitable. The Answer to a loss of Consumption remains a solid increase in the number of Consumers. I also am old-fashioned in a belief that Employment will increase with greater Productivity with the good old venue of decentralization of sector industry. I would advocate a law stipulating that Product must be sold within the State into which it is distributed; this would provide greater Consumer satisfaction due to distributor access, and greatly raise Employment at a Cost equivalent to less than the current Bush Tax Cuts. Current policymakers must be imaginative. lgl